Kuwait to treat stimulus plan as emergency bill

KUWAIT CITY - Kuwait's Cabinet wants to pass its $5.15 billion stimulus bill as an emergency decree, bypassing parliament, the finance minister said on Tuesday, as the oil-rich country's economy stumbles amid the global economic crisis.

By (AP)

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Published: Tue 24 Mar 2009, 6:47 PM

Last updated: Thu 2 Apr 2015, 7:45 AM

Mostafa al-Shimali told Alrai daily that the worldwide crisis was affecting everybody, and the ¢economic situation as well as public opinion" were pushing for quick action.

In the latest sign of the country's dire straits, the official news agency reported Kuwait's 99 investment companies lost nearly $32 billion between August and January.

A third of what those companies once owned was now ¢gone with the winds" of the global downturn, the report added.

The finance minister said the package, the 2009-2010 budget and a capital market authority bill, will be on the agenda at the Cabinet's meeting this week.

The ruler of this close U.S. ally dissolved the legislature last week and called for new elections within two months, saying some lawmakers have abused democracy and stalled development.

The country's 1962 constitution gives the emir the right to legislate by decree on ¢necessary" matters when parliament is not in session or dissolved. When the house comes back, however, it can vote down these laws.

The Central Bank unveiled its stimulus plan in February, but it had been held up in a parliamentary committee with some lawmakers complaining it did not abide by Islamic law. Others have threatened not to approve it unless the government buys or reschedules billions in private debts owed by citizens.

The plan aims at helping struggling investment companies and offers bank loan guarantees.

The economy, which is solely based on oil revenues, has been struggling with fallout from the global crisis. The equity market has seen a drop of around 13 percent year-to-date, and two major financial institutions have defaulted on billions in debts.

Lawmakers have since December helped put the brakes on a $17 billion deal with U.S. giant Dow Chemical and a project to build an oil refinery, damaging the country's business reputation.

Standard Chartered Bank has said the urgent approval of the plan would be ¢a move in the right direction" but warned that ¢on its own it will not manage to drive the economy in a year where investors and corporations are likely to adopt caution and hold back on their spending plans."

In a report released Monday, the bank said Kuwait, which sits on 10 percent of the world's oil reserves, could also benefit from an expansionary budget to counter the effects of the meltdown, though ¢the likelihood is that government spending will be reduced due to the lower oil prices."

The 2009-2010 budget which starts April 1, foresees a 4.25 billion dinar, or $14.72 billion, deficit and cuts on capital spending.

However, Kuwait's shortfalls always turn into surpluses because oil revenues are calculated at lower prices than what they actually sell for.

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